Taxes and business
EIN (Employer Identification Number)
An EIN, or Employer Identification Number, is a free federal tax ID number from the IRS that identifies a business, letting you keep your Social Security number off invoices and W-9s.
What an EIN is
An Employer Identification Number is a nine-digit tax ID the IRS assigns to a business, much like a Social Security number identifies an individual. It is sometimes called a Federal Tax Identification Number.
Despite the name, you do not need to have employees to get one. Sole proprietors, single-member LLCs, and freelancers can all obtain an EIN, and many do specifically to keep their personal SSN private.
Why freelancers get one
When a client hires you, they usually ask you to fill out a Form W-9, which requests a taxpayer ID number. Without an EIN you would write your SSN, handing your most sensitive number to every client. With an EIN you can write that instead and keep your SSN private.
An EIN also looks more professional on invoices and contracts, and it is required if you hire employees, form certain business structures, or open a business bank account at many banks.
How to get one
You can apply for an EIN directly from the IRS online for free, and you typically receive the number immediately upon completing the application. Be cautious of third-party sites that charge a fee for something the IRS provides at no cost.
This is general information, not tax advice. Whether and when you need an EIN depends on your business structure and plans, so consult a qualified tax professional if you are unsure.
Example: A freelance designer operating as a sole proprietor gets a free EIN from the IRS. When a new client sends a W-9, the designer enters the EIN instead of their Social Security number, so their SSN never appears on the form or in the client records.
FAQs
Frequently asked questions
How much does an EIN cost?
Nothing. The IRS issues EINs for free. If a website asks you to pay for one, it is a third party, not the IRS.
Do I need an EIN as a sole proprietor?
Not necessarily, since you can use your SSN. But many sole proprietors get one anyway to keep their SSN off W-9s and invoices and to look more established.
Is an EIN the same as a business license?
No. An EIN is a federal tax ID number. A business license is a separate permit issued by a state or local government to operate, and requirements vary by location.
Can I put my EIN on invoices?
Yes. Listing your EIN on invoices is common and lets you avoid sharing your Social Security number with clients.
Related terms
1099 (Form 1099-NEC)
A 1099-NEC is an IRS form a business issues to a non-employee it paid 600 dollars or more during the year, reporting that income to the contractor and the IRS.
Sole Proprietor
A sole proprietor is the default, unregistered business structure for a single person, where you and the business are the same legal entity for taxes and liability.
LLC (Limited Liability Company)
An LLC, or Limited Liability Company, is a registered business structure that separates your personal assets from business liabilities and is taxed as pass-through by default.
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